Doing Business in India
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MBA 6111 - Geopolitical Business Conditions Doing Business in India March 9, 2009
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Doing Business in India
- 1. Doing Business In: India
Notas del editor
- Introduction Slide:
- CHRISTOPHER SERIO (1) India is located in Southeast Asia and the capital city is New Delhi. Bordered by Burma, China, Nepal, Bangladesh, Bhutan, and Pakistan. One-third the size of US with three to four times the population. Government is a Federal Republic. Administrative divisions make up 28 states and seven union territories. Legal system based on English common law with separate laws applying to Muslims, Christians, and Hindus. * https://www.cia.gov/library/publications/the-world-factbook/print/in.html
- CHRISTOPHER SERIO (2) Diverse economy located near important Indian Ocean trade routes. Economy encompasses village farming, modern agriculture, modern industry, and services. Service industry is very important to growth of India’s economy. Service industry accounts for over half of output will less than a third of labor. Agriculture over 50 percent of labor but only 17.2 percent of output. * https://www.cia.gov/library/publications/the-world-factbook/print/in.html
- CHRISTOPHER SERIO (3) 7,000 km of coastline. Varying climate from tropical monsoon to temperate. Terrain varies from upland plain, to flat rolling plains, to deserts, to the Himalayan Mountains. Natural resources – coal, iron ore, natural gas, diamonds, petroleum, limestone, etc. Climate suffers from droughts, monsoonal flooding, and earthquakes. Some environmental issues are soil erosion and overgrazing, air pollution from industry and vehicle emissions, and water pollution from sewage and runoff of agricultural pesticides. * https://www.cia.gov/library/publications/the-world-factbook/print/in.html
- PRIYA (1) India’s history is an important factor when explaining the many religions and cultures of India. Ancient India is one of the world’s earliest urban civilizations (along with Mesopotamia and Ancient Egypt).
- PRIYA (2) India religions are a major form of world religions and today, Hinduism and Buddhism are the world’s 3rd and 4th largest religions, respectively. Hinduism is the thirds largest religion after Christianity. Sikhism is the world’s fifth largest organized religion in the world. Practice of Islam is the second largest religion in the world. The Practice of Islam is a monotheistic religion which originated with the teachings of the Islamic Prophet Muhammad.
- PRIYA (3) It was believed that a person could be reassigned a higher caste if the person did good deeds in their previous life. In the modern day, the Indian Constitution has outlawed caste based discrimination. Caste barriers have been broken down in most large cities, however, the caste system is still present in rural parts of India. Factors considered by matchmaker when arranging a marriage: age, height, values, values of the families, wealth, social standing, castes and compatibility of the couple’s horoscopes.
- PRIYA (4) Some of the famous Indian actors/actresses that have emerged from Bollywood include AishwaryaRai (pictured), Shahrukh Khan and AmitabhBachchan
- Economist Intellegence Unit. (2008). India Profile. London, United Kingdom. KURT 1 The main objective of the resource section is to provided information so the stage is set for the following sections. The audience needs to have an understanding of what India is working with so they can have a better understanding of the problems and opportunities facing India. The land mass of India is only 2.4% of the world but shares 17% of the worlds population, housing 40% of the worlds illiterates. I wanted to put into perspective the overcrowding in India. The amount of resources supporting the high amount people really sets the tone for understanding India’s current position.
- Economist Intelligence Unit. (2008). India Profile. London, United Kingdom. KURT 2 This slide basically serves to deliver some basic statistical information so people can begin to form an idea of where India is headed in respect to limited resources. The population is already staggering, mixed with the population growth rate, and the number living below the poverty line sets the current situation.
- India, in Europa World online. London, Routledge. University of San Francisco. Retrieved 04 March 2009 from http://0-www.europaworld.com.ignacio.usfca.edu/entry/in KURT 3 If 60% of the countries workforce is working to feed India, and agriculture only accounts for 20% of the GDP, what is happening here? They do not have the technology to increase agriculture output, this is why the agriculture sector is so large but has such a small output. In coinciding with the previously mentioned fact that agriculture accounts for 57% of the land, one can begin to understand the economic conditions that will be discussed later in the presentation.
- Economist Intelligence Unit. (2008). India Profile. London, United Kingdom. KURT 4 This slide was used to set the stage for business growth constraints in India. They produce so much power yet they have rolling brownouts and blackouts. In an age where the majority of business operations depend on a steady power supply for sensitive electronic equipment (Computers, manufacturing, telecom, ect.), India is having problems. India is also heavily reliant on fossil fuels for the production of their energy, leading to more pollution and unhealthy conditions for all things living.
- India, in Europa World online. London, Routledge. University of San Francisco. Retrieved 04 March 2009 from http://0-www.europaworld.com.ignacio.usfca.edu/entry/in KURT 5 I wanted this slide to kind of tie all the pieces of the infrastructure together in order to hit the main point home, that India is not in a good position. Their infrastructure in old, falling apart, and not being modernized. With a growing population and more constraints being placed on their infrastructure, things need to change. We as U.S. citizens, use a majority of the worlds resources, while India has sub standard power, low resource utilization, and inadequate water conditions. This trend of highly imbalanced resources cannot continue. With this in mind, the audience has a background on India’s resources to feed into the next sections.
- DARCY VILLERE (1) In this slide, I was giving a backdrop for under which the country was founded, partially touching on how it was run. The idea was to let the students know some very basic concepts about the founding of India, the fluidity about their rule of law and who were the main stakeholders in the system. Founding: On 15 August 1947, India gained independence from British rule, but at the same time Muslim-majority areas were partitioned to form a separate state of Pakistan. On 26 January 1950, India became a republic and a new constitution came into effect. https://www.cia.gov/library/publications/the-world-factbook/print/in.html Constitution: i.e. Amendment’s that stipulate rights, unless changed by the government example is the Ghandi Pole Dancing video pulled from youtube amidst threats by the government it would ban the company from operating. Rivals: Kashmir, which has a Muslim majority, was claimed by both India and Pakistan following partition in 1947 at the end of British rule. Major source of terrorism. India and Pakistan had agreed a basic outline of a peace deal on Kashmir during the tenure of Pakistani leader Pervez Musharraf, but that the process had faltered as Mr Musharraf had weakenend and finally lost power. Two Parties: Hindu - Designed to represent the country's majority community and Centre-right in nature, the party advocates conservative social policies, self reliance, robust economic growth, foreign policy driven by a nationalist agenda, and strong national defense. The Congress Party: the leader of the Indian Independence Movement, with over 15 million members and over 70 million participants in its struggle against British rule in India.
- DARCY VILLERE (2) This slide was meant to point out that although India is a fairly progressive country (electing a female President) it was still a trouble government that was succeptable to the same foibles that larger natins, such as the US, might have. Who’s in Power: The Congress Party Incumbancy is uncommon, incumbents lose elections three out of every four times Maintained power, winning 3 out of 5 incumbant state government
- ASHLEY (1) Regulatory Agencies These governmental subsidies and agencies have furthered business investment through the Companies Act of 1956, which addresses majority of the daily business operations and setting guidelines for bringing new business. However, the Companies Act is not all encompassing and the Companies Bill of 2008 has recently been proposed to improve the Companies Act, dealing with many inconsistencies and ambiguities such as environmental regulations that allowed for corruption and manipulation. This has led to credibility and confidence in the Indian government by foreign and domestic investors. Special Economic Zones India’s government has implemented Special Economic Zones (SEZ’s) that provide incentives and tax subsidies for bringing business into specific zones. For example, the SEZ’s allow for duty free import and domestic procurement of goods; 100% income tax exemption of export income for the first five years, 50% for the next five; exemption from central sales tax; exemption from service taxes; single clearance level for state and central approvals (versus multiple level); exemption from state sales tax; in addition to many facilities incentives. http://news.vakilno1.com/2008/09/companies-bill-2008-approved-to-replace.html http://business.gov.in/agriculture/index.php http://www.sezindia.nic.in/HTMLS/about.htm http://www.sezindia.nic.in/ http://business.mapsofindia.com/sez/
- ASHLEY (2) There are many similarities between Indian and Chinese business opportunities. Even with a similar business environment, India’s culture has substantially contributed to their vast entrepreneurial growth in recent years. Chinese communism in the 1950’s and 1960’s severely disrupted the flow of domestic entrepreneurial creation. Communists frowned upon personal wealth and private enterprise. Recently, in 2003, 12.5% of the total Indian working population was involved in opportunity-based ventures whereas only 5.5% of the Chinese population participated. http://knowledge.insead.edu/contents/Turner.cfm
- DARCY VILLERE (3) o Mumbai attack, Hindu Nationalist Bharatiya Janata Party, unable to capitalize on it despite Rampant corruption, India's public campaign-finance laws are not enforced, and candidates are regularly backed by donors and corporations that expect favors in return o has to do with unprecedented growth in the economy in the last decade o also with what is seen as p andering to the Muslim minority in the country, which consists of 125 million muslims.
- CHRISTOPHER SERIO (4) Varied marketplace – agriculture, auto, business services, IT, education, travel and tourism. $40 billion annual outsourcing industry. Major IT companies – Wipro, Infosys, Satyam, IBM, HP, and Accenture. Homegrown global businesses – Tata, Birla, and Reliance. http://business.mapsofindia.com/india-business/indian-buinesses.html Tata is an Indian based corporation with significant international operations. 350K employees in seven business sectors around the world. Operate in IT, engineering, materials, services, energy, consumer products, and chemicals. http://www.tata.com/company/index.aspx?sectid=21vxqwHGkoo Birla - $28 billion multinational corporation. Based in Mumbai. Business in textiles, telecom, cement, and philanthropy. http://en.wikipedia.org/wiki/Aditya_Birla_Group Reliance – operates in entertainment, capital funds and asset management, infrastructure, energy, health, and technology. http://en.wikipedia.org/wiki/Reliance_-_Anil_Dhirubhai_Ambani_Group
- CHRISTOPHER SERIO (5) Satyam Computer Services, subject of recent fraud - $1 billion fictitious cash balance. Created over several years of cooked books. Turmoil began in January 2009. WSJ. Satyam: Signed 15 Contracts, Including Renewals, In Jan. February 2, 2009. As scandal unfolds Raju brothers jailed and are awaiting trial. Indian government removed Satyam BOD with intentions of naming ten nominees as replacements. WSJ. Satyam’s Raju Brothers Jailed. January 10, 2009. PWC partners arrested on criminal conspiracy charges. Questions surrounding accounting practices within Indian economy. WSJ. Pricewaterhouse Partners Arrested. January 25, 2009. Infosys – second biggest tech company (by sales) in India. To cut employee bonuses and compensation packages, weary of the months ahead as global financial issues continue. *WSJ. Infosys to Cut Bonuses, Compensation Packages. January 29, 2009. Infosys – cut revenue forecasting for current fiscal year. Indian tech sector struggles back to its feet as they are recovering slowly from Satyam blow. Booming industry has hit sharp slump as global economic downturn presses on. Only silver lining to current conditions is that many former Satyam clients have opened business accounts with Infosys. *WSJ. Infosys Posts 33% Jump in Earnings but Cuts Outlook. January 14, 2009. World Banks acknowledges that two other Indian firms were banned from future contracts. Wipro in June 2007 and Megasoft in December 2007. Though less publicized than Satyam scandal/fallout still raises questions about Indian accounting practices. *WSJ. World Bank Blacklists India’s Wipro. January 12, 2009.
- MIKE LOPEZ (1) India accounts for $525 billion in trade including trade in services, which reflect India’s growing significance in international trade which accounts for nearly 1.5% of world trade. In 2004 India recently introduced the first ever trading policy, “Foreign Trade Policy” which is considered a roadmap for the countries foreign trade which is increasing India’s imports along with its vast exports. This has doubled India’s exports in the past 4 years which has shifted India from protecting producers to benefiting customers. India should achieve 5% world trade by 2020. http://www.indiaonestop.com/tradepartners/indias_trade_partners.html
- MIKE LOPEZ (2) Major trading partners: U.S., China, EU, Russia, Japan. The United states is India’s largest trading partner. Principle U.S. exports are diagnostic or lab reagents, aircraft and parts, advanced machinery, cotton, fertilizer, ferrous waste/scrap metal and computer hardware. Major U.S. imports from India include textiles and ready-made garments, Internet-enabled services, agricultural and related products, gems and jewelry, leather products and chemicals. The United States-India Trade Policy Forum (TPF), formed in July 2005 is an institutional arrangement between the two governments to discuss trade and investment issues. In April 2007, there was the creation of the Private Sector Advisory Group (PSAG) which was created to provide strategic direction to the TPF as the United States and India chart a path for enhanced U.S. Indian economic integration in the next five to ten years. http://209.85.173.132/search?q=cache:tp6gz0W2xikJ:www.ustr.gov/Document_Library/Press_Releases/2008/February/United_States_India_Discuss_Key_Trade_Issues.html+India+trade+united+states&hl=en&ct=clnk&cd=1&gl=us
- MIKE LOPEZ (3) Free trade agreements exist with India and Sri Lanka, Afghanistan, Chile, and Mercosur (the trading zone between Brazil, Argentina, Uruguay and Paraguay). India – EU Strategic Partnership Joint Action Plan was formed during the Summit of 7 in September 2005. The India-EU Strategic Partnership Joint Action Plan was an agreement to take positive steps to further increase bilateral trade and economic cooperation and to tackle barriers to trade and investment. As of January 2009, India’s ambassador to the European Union Jaimini Bhagwati has expressed confidence that the 27-member European Union and India will reach a deal on the Free Trade Agreement (FTA) http://web.worldbank.org/WBSITE/EXTERNAL/COUNTRIES/SOUTHASIAEXT/EXTSARREGTOPINTECOTRA/0,,contentMDK:20592520~menuPK:579454~pagePK:34004173~piPK:34003707~theSitePK:579448,00.html
- cia factbook JC (1) In this slide, I was trying to show that FDI in India had been growing rapidly, but is still lagging behind other developing countries. I do not have the reasons for the disparity between them and China, but it may be due to how slowly India has liberalized their markets.
- Investing in India – available on request from JC JC (2) This slide and the next help to give an overview about which sectors can be invested in. This first slide shows the protected sectors, most of which make sense. Prohibiting FDI in the first three sectors makes good economic or military sense, but retail trading is not expected. Think of all the large companies that make their money selling various products, such as Wal-Mart, that are effectively blocked from the Indian market. This may also be the reason that overall FDI numbers are lagging behind China.
- Investing in India JC (3) These breaks down the various FDI caps on industries in India. I included this to show that although they allow FDI, India still places limits as to how much foreign companies can invest in various sectors, and to show that India is still clinging to its socialist roots.
- http://www.wto.org/english/thewto_e/whatis_e/tif_e/agrm7_e.htm JC (4) Because the tech industry is growing in India, we included these slides as a brief overview of the protections that IP is granted in India. The main point was to show that although India is still a developing country, they afford IP holders many of the same rights that they receive in developed countries.
- Investing in India http://ipindia.gov.in/cgpdtm/AnnualReport_English_2006-2007.pdf JC (5) This slide shows that the number of patents registered in India has been growing in recent years, as they introduce more IP protections. However, they still lag behind both developing countries and fully developed countries in the number of patents filed and granted. One of the reasons for this which I did not mention is because of the bureaucracy at the patent office which may extend the time it takes for a patent application to be examined and decided on.
- Investing in India JC (6) I included this slide to fit in a mini case about the Indian IP system. I was trying to show that even though India has modern protections of IP, they still use their old system to handle the paperwork. In the CD example, it takes over 60 files to copyright the various items on the CD in India, compared to only 1 form in the US. Although India is rapidly advancing in many areas, they are having trouble adapting their infrastructure to deal with everything.